REG - SolGold PLC - Half-Yearly Financial Report
14/02/2020 07:00
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RNS Number : 9854C SolGold PLC 14 February 2020
14 February 2020
SolGold plc
Half-Yearly Financial Report
Quarterly MD&A Filed in Canada
The Board of SolGold (LSE and TSX code: SOLG) is pleased to advise all
shareholders and interested investors of the release of the Company's interim
financial results for the half year ended 31 December 2019. The interim
financial report is included as part of this announcement.
Further, the Board advises shareholders and interested investors that the
Company's website also contains access to additional information required to
be filed on Sedar in Canada in connection with the Company's quarterly
financial period ended 31 December 2019. This additional information is
available in the Financial Reports section of the Investor Centre on the
Company's website: www.solgold.com.au (http://www.solgold.com.au)
By order of the Board
Karl Schlobohm
Company Secretary
Nicholas Mather Tel: +61 (0) 7 3303 0665
SolGold Plc (Chief Executive Officer) nmather@solgold.com.au +61 (0) 417 880 448
(mailto:nmather@solgold.com.au)
Karl Schlobohm
SolGold Plc (Company Secretary) Tel: +61 (0) 7 3303 0661
kschlobohm@solgold.com.au (mailto:kschlobohm@solgold.com.au)
Ingo Hofmaier
SolGold Plc (GM - Project & Corporate Finance) ihofmaier@solgold.com.au Tel: +44 (0) 20 3823 2131
(mailto:ihofmaier@solgold.com.au)
Gordon Poole / Nick Hennis
Camarco (Financial PR / IR) Tel: +44 (0) 20 3757 4997
solgold@camarco.co.uk (mailto:solgold@camarco.co.uk)
Andrew Chubb Tel: +44 (0) 20 7907 8500
Hannam & Partners (Joint Broker and Financial Advisor)
solgold@hannam.partners (mailto:solgold@hannam.partners)
Ross Allister / David McKeown Tel: +44 (0)20 7418 8900
Peel Hunt (Joint Broker and Financial Advisor)
solgold@peelhunt.com (mailto:solgold@peelhunt.com)
James Kofman / Darren Wallace Tel: +1 416 943 6411
Cormark Securities Inc. (Financial Advisor)
dwallace@cormark.com (mailto:dwallace@cormark.com)
UNAUDITED Interim Condensed Consolidated Financial Statements
FOR THE SIX MONTHS ENDED 31 DECEMBER 2019
Corporate Information
DIRECTORS
Brian Moller (Non-Executive Chairman)
Nicholas Mather (Executive Director)
Robert Weinberg (Non-Executive Director)
Craig Jones (Non-Executive Director)
James Clare (Non-Executive Director)
Liam Twigger (Non-Executive Director)
Jason Ward (Executive Director)
COMPANY SECRETARY
Karl Schlobohm
REGISTERED OFFICE
Locke Lord LLP
201 Bishopsgate
London EC2M 3AB
United Kingdom
Registered Number 5449516
AUSTRALIAN OFFICE
Level 27, 111 Eagle St
Brisbane QLD 4000
Phone: + 61 7 3303 0660
Fax: +61 7 3303 0681
Email: info@solgold.com
Web Site: www.solgold.com.au (http://www.solgold.com.au)
AUDITORS
BDO LLP
55 Baker Street
London W1U 7EU
United Kingdom
BROKERS
Hannam & Partners
2 Park Street
London W1K 2HX
United Kingdom
SP Angel Corporate Finance LLP
Prince Frederick House
35-39 Maddox Street
London W1S 2PP
United Kingdom
UK SOLICITORS
Locke Lord LLP
201 Bishopsgate
London EC2M 3AB
United Kingdom
AUSTRALIAN SOLICITORS
HopgoodGanim
Level 8, Waterfront Place
1 Eagle Street
Brisbane QLD 4000
Australia
REGISTRARS
Computershare Investor Services plc
The Pavilions, Bridgwater Road
Bristol BS99 7NH
OPERATIONS REPORT
The Directors present their report on the company and its controlled entities
for the half year ended 31 December 2019. SolGold plc is a public limited
company incorporated in England and Wales.
DIRECTORS
The names of the Directors in office at any time during or since the end of
the period are:
Brian Moller (Non-Executive Director)
Nicholas Mather (Executive Director)
Robert Weinberg (Non-Executive Director)
Craig Jones (Non-Executive Director)
James Clare (Non-Executive Director)
Liam Twigger - (Non-Executive Director)
Jason Ward - (Executive Director)
Anna Legge - (Executive Director) - resigned 13 November 2019
Directors have been in office since the start of the financial year to the
date of this report unless otherwise stated.
PRINCIPAL ACTIVITIES
The principal activities of SolGold plc (the "Company") and its subsidiaries
(together "SolGold" or the "Group") are exploration for copper, gold and other
minerals in Ecuador, Solomon Islands and Queensland, Australia.
Review and results of operations
The loss after tax for the Company for the half-year ended 31 December 2019
was US$4,982,381 (31 December 2018 loss of US$27,483,519).
Exploration Activities
Cascabel Project (Ecuador)
The Cascabel Project is located on the northern section of the prolific Andean
Copper belt, renowned as the base for nearly half of the world's copper
production. The project area hosts mineralisation of Eocene age, the same age
as numerous Tier 1 deposits along the Andean Copper Belt in Chile and Peru to
the south. The project base is located at Rocafuerte in northern Ecuador,
approximately three hours' drive north of Quito, close to water, power supply
and Pacific ports. Having fulfilled its earn in requirements, SolGold is a
registered shareholder with an unencumbered legal and beneficial 85% interest
in ENSA (Exploraciones Novomining S.A.) which holds 100% of the Cascabel
tenement covering approximately 50km(2), and subject to a royalty which may be
purchased by SolGold for US$4.0m at development decision. Following the
preparation of a Feasibility Study by ENSA, Cornerstone - which currently
holds a 15% interest in ENSA - will be obligated to contribute to the funding
of ENSA.
A review of drilling results has identified world class intersections at
updated metal prices, and geology model analysis is constantly improving drill
targeting capabilities. Drilling to date has not yet constrained the rich
Alpala copper-gold deposit, and the deposit continues to grow.
During the six months ended 31 December 2019, the Company capitalised
US$22,947,251 on the Cascabel project.
SolGold drilling activities focused on activities supporting the Alpala
Deposit Pre-Feasibility Study (PFS) while continuing to extend and upgrade the
status of the Alpala Resource. Drill testing of the Trivinio target has
commenced, whilst the numerous other untested targets, namely at Moran,
Cristal, Tandayama-America and Chinambicito, are flagged for drill testing as
overall program demands allow.
SolGold's current focus is the collection of additional metallurgical,
geotechnical, hydrological, and hydrogeological data for the Pre-Feasibility
Study (PFS) and the delivery of a third Mineral Resource Estimate (MRE#3). The
conversion of most of the MRE#2 Inferred Resource into Indicated Resources has
been a major objective of the drilling this year as the Indicated Resources
are the basis for the PFS.
OPERATIONS REPORT (continued)
Supplementary work underway at the Alpala Deposit includes geotechnical mining
studies using downhole optical and acoustic Televiewer imaging, and
rock-mechanics investigations using in-situ over-coring (3D stress testing),
as well as in-situ measurement of rock mass permeability by packer testing.
As a consequence of drought conditions and in consideration of impacts on
local waterways and as well as a cash management measure, drilling operations
remain curtailed since September.
2019 drilling intersected zones of very high gold grades in the core and
periphery of the deposit at Alpala. This may be related to intermediate- to
high- sulfidation state sulphide-mineral assemblages associated with a phyllic
alteration over-print and is a feature common in many of the world's richest
porphyry deposits, like Oyu Tolgoi, Grasberg and Wafi-Golpu.
3D modelling of key geological parameters for the Alpala deposit has resulted
in the completion of dynamic models for geology, veining, alteration and
copper and gold grades, all of which are constantly updated as drilling
progresses.
A study to develop the understanding of the stratigraphic and post mineral
structural architecture and geometry of the Alpala deposit and greater Alpala
district was undertaken during this period. The knowledge gained from the
study supports ongoing exploration and drill targeting for both the Alpala
deposit, and other targets in the Cascabel concession.
A study of the orientation of B-veins (a key input for modeling the grade
distribution at Alpala) was re-modelled using structural information from
oriented core. The geometry of the porphyry is controlled by the orientation
of the B-veins, and the distribution indicates potential mineralization toward
the north of the Alpala system which is interpreted as another porphyry
body. This information is used in the MRE#3.
Anaconda 1:5000 geological mapping was conducted across the concession to
enhance existing and complete previously unmapped areas of the concession.
This enabled updated knowledge of surface features including lithology,
mineralisation, alteration and structures.
An updated structural model encompassing new surface mapping and oriented core
was developed. This will be an integral input into mine design and planning
in the Feasibility Studies.
Seven groundwater monitoring sites was identified at key locations throughout
the project. 2133m (averaging 305m at each site) of electrical resistivity
tomography (ERT) sections were performed at 7 of the drill pad locations to
confirm the presence of water and structures targeted. Three of the water
monitoring sites (comprising two drill holes at each) were completed by the
end of November 2019. Downhole piezometers have been installed and are
currently logging underground water levels. Additionally, manual downhole
measurements are recorded each week for those paired holes without
piezometers.
Two weather stations and five streamflow monitoring stations have also been
installed for environmental purposes.
A program of geotechnical characterisation of soils was undertaken. The field
component has been completed as of the end of December. The program comprised
56 pits of 5m depth excavated by hand, and included insitu tests (soil vane,
penetrometer and insitu density), and lab testing of soil samples. The
laboratory testing is ongoing.
Samples of clay and/or fault gauge from the Alpala deposit and proposed
decline geotechnical drillholes were collected and analysed with the SolGold
Terraspec device. Soil samples taken from the geotechnical pits were also
analysed with the onsite Terraspec machine to provide information on clay
composition.
OPERATIONS REPORT (continued)
A detailed study of the 12 Aguinaga holes was completed as part of an ongoing
re-evaluation of the Aguinaga target. The study included:
· Relogging all holes (7258.69m of drilling).
· Lithology reinterpretation based on thin sections and macroscopic
description.
· Litho-geochemical analysis and their correlation with the
lithology reinterpretation.
· Geochemical footprint analysis and their comparation with the
Yerington model (Halley 2015).
· Structural B-veins trend analysis.
· Description of existing alteration and veins type present in
Aguinaga.
· Photographic register of lithology and their special
characteristics.
The study has identified additional targets within the Aguinaga prospect to
the North and to the West of the existing drilling.
Laboratory metallurgical test programs continued at ALS Metallurgical
Laboratories, Kamloops, Ca, and Balcatta, W.A. Four master composites were
used for process optimisation and locked cycle tests, with the optimised
circuit and conditions used for locked cycle tests. The locked cycle tests
were run with site sourced water, initially without water recycle. The tests
were then repeated with recycled water to simulate process water use. This
produced eight sets of locked cycle results, with feed grades that varied from
0.21% Cu to 1.56% Cu. Copper concentrate grade ranged from 25.7% Cu to 30.1%
Cu. Gold varied from 10.3 g/t to 16.7 g/t, and silver from 45 g/t to 93 g/t.
Extended analysis showed very low deleterious elements in concentrate, well
below penalty limits.
The rougher tailing from each of the rougher flotation variability tests were
subjected to Davis Tube Recovery (DTR) tests to evaluate potential for
magnetite recovery. The tests were conducted at the as received grind size
(typically 150 µm) at a magnetic intensity of 4,000 Gauss, providing a
preliminary magnetite roughing evaluation. Magnetite recoveries were
calculated based on the flotation feed mineralogy. The results indicate that
above a feed grade of 2.5% magnetite, concentrate grades of >40% magnetite
is produced, potentially suitable for regrind and cleaning to saleable
magnetite concentrate specifications. Magnetite recoveries to these
concentrates averaged 85%.
The copper cleaner tailing from the flotation program was collected and formed
into three composites, with bottle roll cyanidation testwork in progress to
evaluate extraction of copper, gold and silver to enhance recovery. Further
work is planned to evaluate biological and pressure oxidation and thiosulphate
leach.
Further work scheduled for the laboratory test program include settling tests
on tailing and concentrate, concentrate regrind power evaluation tests and
variability flotation tests.
Longer term planning includes a bulk sampling program to generate 20 t to 30 t
of material for pilot plant evaluation. This will include vendor thickening
and filtration tests, transportable moisture limits (TML) for shipment,
rheology tests for concentrate and tailing pipelines and further tailing
characterisation work. In addition, selected sample will be used for crushing
tests and pyrite concentrate will be produced for further leach evaluation. If
warranted, tailing will be evaluated for more detailed magnetite recovery.
OPERATIONS REPORT (continued)
Other Projects (Ecuador)
A comprehensive, nation-wide desktop study was undertaken by the Company's
independent experts to analyse the available regional topographic, geological,
geochemical and gravity data over the prospective magmatic belts of Ecuador,
with the aim of understanding the controls to copper-gold mineralization on a
regional scale. The Company has delineated and ranked regional exploration
targets for the potential to contain significant copper-gold deposits. As a
result of this study, the Company formed and initially funded, four new 100%
owned subsidiary companies in Ecuador; Carnegie Ridge Resources S.A., Green
Rock Resources S.A., Cruz del Sol S.A. and Valle Rico Resources S.A. These
subsidiaries currently hold 72 mineral concessions over approximately 3,200
km(2).
Based on the results of this initial exploration, 13 priority targets have
been identified for second phase exploration in Ecuador. Ongoing exploration
will continue to focus on advancing these priority projects, through
geophysical surveys and detailed soil geochemistry, with a view to progress to
drill testing as soon as permissions are in place. The 13 priority projects
are as follows:
· Blanca
· La Hueca
· Porvenir
· Cisne Loja
· Timbara
· Rio Amarillo
· Chillanes
· Salinas
· Sharug
· Cisne Victoria
· Coangos
· Chical
· Cisne Loja (Celen)
The ongoing exploration program on these projects continues to focus on:
· Drill Testing targets
· Collection of geophysical data
· Mapping and geochemical sampling of new areas
OPERATIONS REPORT (continued)
Queensland Projects (Australia)
In Queensland, Australia, the Company has identified the following major
project areas:
· Rannes
· Mount Perry
· Normanby
· Westwood
· Mt Pring
· Cracow West
SolGold continues to hold tenements across central and southeast Queensland,
through its wholly owned subsidiaries, Central Minerals Pty Ltd and Acapulco
Mining Pty Ltd. Central Minerals Pty Ltd currently holds 5 exploration
permits: EPM 25300 (Cooper Consolidated, Rannes Project); EPM 18760
(Westwood); EPM 18032 (Cracow West); EPM 27211 (Mt Pring); and EPM 19639
(Goovigen Consolidated, Rannes Project). Acapulco Mining Pty Ltd currently
holds exploration permits at EPM 25245 (Mount Perry) and EPM 19410 (Normanby).
The Exploration activities completed during this period were on the Rannes
Project and included:
· Work on the Rannes Project during Q4, 2019 focused on drillhole data
validation and completion of a 3D workspace to allow integration of 3DIP, VTEM
and magnetic inversion model data.
· VTEM inversion modelling during Q3, 2019 identified a number of high
priority basement conductors that appear to be located down-plunge from the
inferred and indicated resources at both the Crunchie and Kauffman's
prospects.
Further details on exploration programs on other Queensland tenements will be
finalised in coming months with a commitment to maintain and progress the
concessions.
Solomon Islands Projects
The Kuma project lies just to the south-west of a series of major
NW-SE-trending arc parallel faults, associated with numerous Cu and Au
anomalies in streams and soils. The project area overlies a 3.5‐kilometre
wide, annular, caldera‐like topographic feature. Annular and nested
topographic anomalies in the region suggest the presence of extensive
batholiths of the Koloula Diorite beneath the volcanic cover of the Suta
Volcanics. The prospect geology is dominated by a 4km by 1km lithocap. This
extensive zone of argillic and advanced argillic alteration is caused by
hydrothermal fluids that emanate from the top of porphyry copper-gold
mineralising systems, and thus provides a buried porphyry copper-gold target.
The geochemically anomalous portion of the Kuma lithocap (north-west end) lies
within the annular topographic anomaly. Kuma has a spectacular oxidised float
boulder trail along the Kuma River and was traced to Alemba and Kolovelo
creeks which lead to discovery of broad hydrothermal alteration zones and
lithocap.
Previous exploration completed at Kuma under the Guadalcanal Joint Venture
between SolGold and Newmont included extensive geochemical sampling (BLEG,
rock chip and channel samples), geological mapping, a magnetic survey and an
electromagnetic survey. Geochemical results define a central zone of
manganese depletion (Mn < 200 ppm) inferred to indicate the destruction of
mafic minerals by hydrothermal alteration. Zinc > 75 ppm forms an annulus
to this zone, and Molybdenum > 4 ppm lies along the margins of the
manganese low indicating potential for porphyry CuAu mineralisation at depth.
TerraSpec spectral analysis of sieved coarse fraction soil samples covering
the Kuma lithocap in integration with known geology in the prospect area has
highlighted a primary porphyry target centre in the northern portion of the
lithocap that SolGold plans to drill test upon granting of tenure.
Low temperature quartz veins with comb textures have been observed in outcrop
the Kuma and Alimuno Rivers. Surface alteration, geochemistry, and Terraspec
results have been encouraging.
Further work is planned to test the high sulfidation Kuma prospect that
focuses on the upper part of Kuma ridges and a drilling program is planned for
2020.
Activities completed in this period include the establishment of an
exploration office and commencement of community work.
OPERATIONS REPORT (continued)
Equity
On 20 September 2019, the Company issued a combined total of 3,150,000
unlisted share options over ordinary shares of the Company to a Director
following approval granted by shareholders at the Company's AGM on 20
September 2019. The options are exercisable at £0.60 and expire on 20
December 2021.
On 2 December 2019, the Company issued 77,000,000 new ordinary shares at
£0.2215 to BHP Billiton Holdings Limited ("BHP"). As part of the share
subscription, BHP were issued 19,250,000 options exercisable at £0.37 which
expire on 27 November 2024.
Corporate
The Group achieved several milestones during the half year ended 31 December
2019. These included:
· Entering into an agreement with BHP Billiton Holdings Limited to
successfully complete a placement of 77 million shares at 22.15p to raise
US$22 million (£17 million).
· Scout drilling permits were granted for several Regional projects
during the period.
· First drill hole at the Blanca projects intersected a 30cm wide
mineralised vein with visible gold along with multiple thin sulphide rich
veins and mineralised fault zones.
The Group is required to raise further funds to bring projects into
development and production and currently has insufficient working capital for
the foreseeable future. The Group is exploring a number of options to raise
funds for the next stage of development and the Directors are confident that
they will be successful in securing sufficient funds to meet liquidity
requirements. Further details are given in note 1.
Matters subsequent to the half yearly financial period
The Directors are not aware of any significant changes in the state of affairs
of the Group or events after balance date that would have a material impact on
the half year consolidated financial statements.
Signed in accordance with a resolution of the board of Directors.
Nicholas Mather
Executive Director
Brisbane
13 February 2020
Qualified Person
Information in this report relating to the exploration results is based on
data reviewed by Mr. Jason Ward (B.Sc. Hons Geol.), the Chief Geologist of the
Company. Mr. Ward is a Member of the Australasian Institute of Mining and
Metallurgy, holds the designation MAusIMM (CP), and has in excess of 20 years'
experience in mineral exploration and is a Qualified Person for the purposes
of the relevant LSE and TSX Rules. Mr. Ward consents to the inclusion of the
information in the form and context in which it appears.
interim condensed Consolidated Statement of Profit or loss and other
Comprehensive Income
for the HALF YEAR ended 31 DECEMBER 2019
Three months ended Three months ended Six months Six months
31 December 2019 31 December 2018 ended ended
31 December 2019 31 December 2018
Notes US$ US$ US$ US$
(unaudited) (unaudited) (unaudited) (unaudited)
Expenses
Exploration costs written-off (22,953) 2,930 (27,235) (27,142)
Administrative expenses 3 (1,583,709) (23,729,146) (4,431,445) (27,640,610)
Operating loss (1,606,662) (23,726,216) (4,458,680) (27,667,752)
Finance income 3 119,329 6,500 290,802 12,558
Finance costs (46,691) - (46,691) -
Loss before tax (1,534,024) (23,719,716) (4,214,569) (27,655,194)
Tax (expense) benefit (15,086) (529,428) (767,812) 171,675
Loss for the period (1,549,110) (24,249,144) (4,982,381) (27,483,519)
Other comprehensive profit / (loss)
Items that may be reclassified to profit and loss
Change in fair value of financial assets held at fair value 188,496 1,165,442 (1,783,740) 2,828,399
Exchange differences on translation of foreign operations 295,953 (2,003,801) (8,836) (3,933,503)
Change in other reserves (50,690) - (64,272) -
Other Comprehensive (loss) / profit, net of tax 433,759 (838,359) (1,856,848) (1,105,104)
Total comprehensive (loss) / income for the period (1,115,351) (25,087,503) (6,839,229) (28,588,623)
Loss for the period attributable to:
Owners of the parent company (1,533,479) (24,234,313) (4,950,064) (27,414,789)
Non-controlling interest (15,631) (14,831) (32,317) (68,730)
Loss for the period (1,549,110) (24,249,144) (4,982,381) (27,483,519)
Total comprehensive profit / (loss) for the period is attributable to:
Owners of the parent company (1,099,720) (25,072,672) (6,806,912) (28,519,893)
Non-controlling interest (15,631) (14,831) (32,317) (68,730)
Total comprehensive (loss) / income for the period (1,115,351) (25,087,503) (6,839,229) (28,588,623)
Notes Three months ended Three months ended Six months Six months
31 December 2019 31 December 2018 ended ended
Cents Cents 31 December 2019 31 December 2018
(unaudited) (unaudited) Cents Cents
(unaudited) (unaudited)
Basic earnings per share 4 (0.1) (1.4) (0.3) (1.6)
Diluted earnings per share 4 (0.1) (1.4) (0.3) (1.6)
The above consolidated statement of profit or loss and other comprehensive
income should be read in conjunction with the accompanying notes.
interim condensed Consolidated Statement of Financial Position
at 31 DECEMBER 2019
31 December 30 June
2019 2019
Notes US$ US$
(unaudited) (audited)
Assets
Property, plant and equipment 13,731,955 8,847,785
Intangible assets 5 208,605,630 177,481,872
Financial assets held at fair value through OCI 6 3,402,757 5,952,439
Loans receivable and other non-current assets 7 1,352,132 7,796,541
Total non-current assets 227,092,474 200,078,637
Loans receivable 7 7,005,323 -
Other receivables and prepayments 3,756,255 2,891,326
Cash and cash equivalents 23,071,680 41,746,200
Total current assets 33,833,258 44,637,526
Total assets 260,925,732 244,716,163
Equity
Share capital 10 27,397,650 26,402,424
Share premium 10 315,828,411 297,375,959
Other reserves 38,313,446 40,084,833
Accumulated loss (125,292,752) (120,342,688)
Foreign currency translation reserve (4,885,429) (4,876,593)
Equity attributable to owners of the parent company 251,361,326 238,643,935
Non-controlling interest (474,681) (442,364)
Total equity 250,886,645 238,201,571
Liabilities
Trade and other payables 5,930,720 6,514,592
Lease Liability 8 582,644 -
Total current liabilities 6,513,364 6,514,592
Lease Liability 8 1,141,489 -
Other financial liabilities 9 2,384,234 -
Total non-current liabilities 3,525,723 -
Total liabilities 10,039,087 6,514,592
Total equity and liabilities 260,925,732 244,716,163
The above consolidated statement of financial position should be read in
conjunction with the accompanying notes.
interim condensed Consolidated Statement of Changes in Equity
for the HALF YEAR ended 31 DECEMBER 2019
Share capital Share premium Financial assets held at fair value through other comprehensive income Share based payment reserve Foreign currency translation reserve Other Reserves Accumulated losses Total Non-controlling interests Total Equity
US$
US$
US$ US$ US$
US$ US$ US$ US$ US$
Balance 30 June 2018 (audited) 24,443,853 222,941,518 1,933,094 13,391,848 (2,838,649) (105,893) (88,859,667) 170,906,104 (314,286) 170,591,818
Loss for the period - - - - - - (27,414,789) (27,414,789) (68,730) (27,483,519)
Other comprehensive income for the period - - 2,828,399 - (3,933,503) - - (1,105,104) - (1,105,104)
Total comprehensive income for the period - - 2,828,399 - (3,933,503) - (27,414,789) (28,519,893) (68,730) (28,588,623)
New share capital subscribed 1,431,377 62,098,668 - - - - - 63,530,045 - 63,530,045
Options exercised 527,194 12,441,354 - - - - - 12,968,548 - 12,968,548
Share issue costs - (105,581) - - - - - (105,581) - (105,581)
Options expired - - - - - - - - - -
Value of options issued to employees and consultants - - - 23,774,390 - - - 23,774,390 - 23,774,390
Balance 31 December 2018 (unaudited) 26,402,424 297,375,959 4,761,493 37,166,238 (6,772,152) (105,893) (116,274,456) 242,553,613 (383,016) 242,170,597
Loss for the period - - - - - - (4,526,926)) (4,526,926) (59,348) (4,586,274)
Other comprehensive income for the period - - (1,387,080) - 1,895,559 - - 508,479 - 508,479
Total comprehensive income for the period - - (1,387,080) - 1,895,559 - (4,526,926) (4,018,447) (59,348) (4,077,795)
New share capital subscribed - - - - - - - - - -
Options exercised - - - - - - - - - -
Share issue costs - - - - - - - - - -
Options expired - - - (458,694) - - 458,694 - - -
Value of options issued to employees and consultants - - - 108,769 - - - 108,769 - 108,769
Balance 30 June 2019 (audited) 26,402,424 297,375,959 3,374,413 36,816,313 (4,876,593) (105,893) (120,342,688) 238,643,935 (442,364) 238,201,571
Loss for the period - - - - - - (4,950,064) (4,950,064) (32,317) (4,982,381)
Other comprehensive income for the period - - (1,783,740) - (8,836) (64,272) - (1,856,848) - (1,856,848)
Total comprehensive income for the period - - (1,783,740) - (8,836) (64,272) (4,950,064) (6,806,912) (32,317) (6,839,229)
New share capital subscribed 995,226 18,456,842 - - - - - 19,452,068 - 19,452,068
Share issue costs - (4,390) - - - - - (4,390) - (4,390)
Options expired - - - - - - - - - -
Value of options issued to employees and consultants - - - 76,625 - - - 76,625 - 76,625
Balance 31 December 2019 (unaudited) 27,397,650 315,828,411 1,590,673 36,892,938 (4,885,429) (170,165) (125,292,752) 251,361,326 (474,681) 250,886,645
The above consolidated statement of changes in equity should be read in
conjunction with the accompanying notes.
interim condensed Consolidated Statement of Cash Flows
for the HALF YEAR ended 31 DECEMBER 2019
Three months Three months Six months Six months
ended
ended
ended
ended
31 December 2019 31 December 2018 31 December 2019 31 December
2018
Notes US$ US$ US$ US$
(unaudited) (unaudited) (unaudited) (unaudited)
Cash flows from operating activities
Loss for the period (1,549,110) (24,249,144) (4,982,381) (27,483,519)
Depreciation 305,521 (156,978) 329,789 31,898
Interest on Lease Liability 46,691 - 46,691 -
Share based payments expense - 20,710,235 76,625 23,774,390
Write-off of exploration expenditure 22,953 (2,930) 27,235 27,142
Foreign exchange (gain)/loss (644,669) (425,353) 126,111 (1,508,221)
Movement in fair value of derivative liability (207,933) - (207,933) -
Deferred taxes 15,086 529,428 767,812 (171,675)
Non cash employee benefit expense - Company Funded Loan Plan - 1,260,567 - 1,274,282
Accretion of interest - Company Funded Loan Plan (115,202) - (223,037) -
(Increase) decrease in other receivables and prepayments (357,581) 136,621 (91,369) (79,608)
Increase (decrease) in trade and other payables (689,862) (891,967) (297,927) (221,773)
Net cash outflow from operating activities (3,174,106) (3,089,521) (4,428,384) (4,357,084)
Cash flows from investing activities
Acquisition of property, plant and equipment (1,111,444) (1,684,344) (4,356,918) (3,660,515)
Payments for security deposits (4,939) (47,466) (51,993) (52,468)
Acquisition of exploration and evaluation assets (9,756,478) (19,655,809) (30,987,878) (37,569,808)
Net cash (outflow)from investing activities (10,872,861) (21,387,619) (35,396,789) (41,282,791)
Cash flows from financing activities
Proceeds from the issue of ordinary share capital and options 22,044,235 69,847,196 22,044,235 70,607,146
Payment of issue costs (6,271) (111,287) (6,271) (112,498)
Repayments of lease liability (197,163) - (197,163) -
Net cash (outflow) inflow from financing activities 21,840,801 69,735,909 21,840,801 70,494,648
Net (decrease) increase in cash and cash equivalents 7,796,834 45,258,769 (17,984,372) 24,854,773
Cash and cash equivalents at beginning of period 16,506,686 39,350,587 41,746,200 60,575,504
Effects of exchange rate changes on cash and cash equivalents (1,231,840) (1,370,700) (690,148) (2,191,621)
Cash and cash equivalents at end of period 23,071,680 83,238,656 23,071,680 83,238,656
The above consolidated statement of cash flows should be read in conjunction
with the accompanying notes.
NOTES TO THE interim condensed CONSOLIDATED FINANCIAL STATEMENTS
for the HALF YEAR ended 31 DECEMBER 2019
NOTE 1 summary of significant accounting policies
Basis of preparation
This general purpose half year condensed consolidated financial report for the
half year ended 31 December 2019 has been prepared in accordance with
International Accounting Standard 34 Interim Financial Reporting, as issued by
the International Accounting Standards Board ("IASB"), International
Accounting Standards 34, Interim financial Reporting, as adopted by the
European Union and the Listing Rules.
The half year condensed consolidated financial statements are presented in
United States dollars ("US$") and have been prepared on the historical cost
basis, apart from financial assets held at fair value.
The half year condensed consolidated financial report does not include all
notes of the type normally included within the annual financial report and
therefore cannot be expected to provide as full an understanding of the
financial performance, financial position and financing activities of the
consolidated entity. The financial information does not constitute statutory
accounts within the meaning of section 434 of the companies Act 2006. The
auditors' reports on the accounts for 30 June 2019 were unqualified, did not
draw attention to any matters by way of emphasis, and did not contain a
statement under 498(2) or 498(3) of the Companies Act 2006.
It is recommended that the half year condensed consolidated financial report
be read in conjunction with the annual report for the year ended 30 June 2019
and considered together with any public announcements made by SolGold plc and
its controlled entities during the during the six months ended 31 December
2019.
Going concern
The interim condensed financial statements have been prepared on a going
concern basis which contemplates the continuity of normal business activities
and the realisation of assets and discharge of liabilities in the ordinary
course of business.
For the six months ended 31 December 2019 the Group generated a consolidated
loss after tax of US$4,982,381 and incurred operating cash outflows of
US$4,428,384. As at 31 December 2019 the Group had US$23,071,680 in cash and
cash equivalents and a net working capital surplus of US$17,520,801 (30 June
2019: US$38,122,935). It should be noted that the current working capital
levels will not be sufficient to bring the Group's projects into full
development and production and, in due course, further funding will be
required.
The ability of the Group to continue as a going concern is dependent upon the
Group being able to manage its liquidity requirements by taking some or all of
the following actions:
1. Raising additional capital or securing other forms
of financing, as and when necessary to meet the levels of expenditure required
for the next 12 months from the date of this report, and to meet the Group's
working capital requirements;
2. Reducing its level of capital expenditure through
farm-outs and/or joint ventures;
3. Reducing its working capital expenditure; and
4. Disposing of non-core assets.
These conditions give rise to a material uncertainty which may cast
significant doubt over the Group's ability to continue as a going concern.
Notwithstanding the above, the Directors consider it appropriate to prepare
the financial statements on a going concern basis after having regard to the
following matters:
1. The Group has a proven ability to raise the necessary funding
or settle debts via the issuance of shares. The Group has in the last
reporting period raised US$22,044,235 and is in late stage negotiations on a
number of various other strategic financing options.
Should the Group be unable to continue as a going concern, it may be required
to realise its assets and liabilities other than in the ordinary course of
business, and at amounts that differ from those stated in the financial
statements.
The financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts, or to the amount
and classification of liabilities that might be required should the Group not
be able to achieve the matters set out above and thus be able to continue as a
going concern.
NOTES TO THE interim condensed CONSOLIDATED FINANCIAL STATEMENTS
FOR THE HALF YEAR ENDED 31 DECEMBER 2019
NOTE 1 summary of significant accounting policies
Basis of preparation (continued)
Comparatives
When required by Accounting Standards, comparatives have been adjusted to
conform to changes in presentation for the current financial year. The
accounting policies for the comparatives are consistent with those followed in
the preparation of the Group's consolidated financial statements for the year
ended 30 June 2019.
Significant accounting policies
The group has applied the same accounting policies and methods of computation
in its half year consolidated financial statements as in its 2019 annual
financial statements, except for those that relate to new standards and
interpretations effective for the first time for periods on (or after) 1
January 2019, and will be adopted in the 2020 annual financial statements.
New standards impacting the Group that have been adopted in the half year
financial statements for the six months ended 31 December 2019, and which have
given rise to changes in the Group's accounting policies are:
o IFRS 16 Leases
o IFRIC 23 Uncertainty over Income Tax Treatment
IFRS 16 Leases is applicable to annual reporting periods beginning on or after
1 January 2019. The standard replaces IAS 17 'Leases' and for lessees will
eliminate the classifications of operating leases and finance leases. Subject
to exceptions, a "right-of-use' asset will be capitalised in the statement of
financial position and measured at the present value of the future lease
payments to be made over the term of the lease. A liability corresponding to
the capitalised lease will also be recognised. The Group depreciates the
right-of-use assets on a straight-line basis from the lease commencement date
to the end of the lease term and an interest expense on the recognised lease
liability.
The Group has adopted IFRS 16 using the modified retrospective approach and
therefore the comparative periods have not been restated.
Upon recognition on 1 July 2019, a 'right-of-use' asset of US$1,894,736 was
capitalised in the balance sheet and recognised in Property Plant &
Equipment with a corresponding lease liability recognised of US$1,894,736. All
'right-of-use' assets relate to lease contracts on office buildings.
IFRIC 23 interpretation addresses the accounting for income taxes when there
is uncertainty over tax treatments. It clarifies that an entity must consider
the probability that the tax authorities will accept a treatment retained in
its income tax filings, assuming that they have full knowledge of all relevant
information when making their examination. In such a case, the income taxes
shall be determined in line with the income tax filings.
Management has made a preliminary assessment and has determined that is it
probable the tax authorities will accept the tax position, and therefore tax
balances will be calculated under the existing accounting standard. There are
no additional actions required.
NOTES TO THE interim condensed CONSOLIDATED FINANCIAL STATEMENTS
FOR THE HALF YEAR ENDED 31 DECEMBER 2019
NOTE 1 summary of significant accounting policies
Basis of preparation (continued)
(i) Subsidiaries
The half year condensed consolidated financial statements comprise the
financial statements of SolGold plc and its controlled entities as at 31
December 2019.
Where the company has control over an investee, it is classified as a
subsidiary. The company controls an investee if all three of the following
elements are present: power over the investee, exposure to variable returns
from the investee, and the ability of the investor to use its power to affect
those variable returns. Control is reassessed whenever facts and circumstances
indicate that there may be a change in any of these elements of control.
The condensed consolidated financial statements present the results of the
company and its subsidiaries ("the Group") as if they formed a single entity.
Intercompany transactions and balances between group companies are therefore
eliminated in full.
The condensed consolidated financial statements incorporate the results of
business combinations using the acquisition method. In the statement of
financial position, the acquiree's identifiable assets, liabilities and
contingent liabilities are initially recognised at their fair values at the
acquisition date. The results of acquired operations are included in the
consolidated statement of comprehensive income from the date on which control
is obtained. They are deconsolidated from the date on which control ceases.
The results of subsidiaries acquired or disposed of during the year are
included in the condensed consolidated statement of comprehensive income from
the effective date of acquisition or up to the effective date of disposal, as
appropriate. Where necessary, adjustments are made to the financial
statements of subsidiaries to bring the accounting policies into line with
those used by the Group.
Non-controlling interests are allocated their share of net profit after tax in
the statement of comprehensive income and presented within equity in the
condensed consolidated statement of financial position, separately from the
equity of the owners of the parent.
(ii) Transactions eliminated on consolidation
Intra-group balances and any unrealised gains and losses or income and
expenses arising from intra-group transactions, are eliminated in preparing
the consolidated financial statements.
Derivative Financial Instruments
The Company has issued options that are exercisable in a currency other than
the functional currency of the entity issuing. As such these options are
treated as derivative liabilities which are measured initially at fair value
and gains or losses on subsequent re-measurement are recorded in the profit or
loss.
NOTES TO THE interim condensed CONSOLIDATED FINANCIAL STATEMENTS
FOR THE HALF YEAR ENDED 31 DECEMBER 2019
NOTE 2 OPERATING SEGMENTS
The Group determines and separately reports operating segments based on
information that is internally provided to the Directors, who are the Group's
chief operating decision makers.
The Group has outlined below the separately reportable operating segments,
having regard to the quantitative threshold tests provided in IFRS 8 Operating
Segments, namely that the relative revenue, asset or profit / (loss) position
of the operating segment equates to 10% or more of the Group's respective
total. The Group reports information to the Board of Directors by project
areas. That is, the financial position of each project area is reported
discreetly, together with an aggregated corporate and administrative cost
centre.
31 December 2019 Finance Income Depreciation Impairment of E&E Loss for the period Assets Liabilities Share Based Payments Non-current asset additions
(unaudited)
US$ US$ US$ US$ US$ US$ US$ US$
Cascabel project * - 24,439 - (215,447) 174,321,867 3,014,331 - 21,890,323
Other Ecuadorian projects - 52,113 27,664 (472,590) 41,063,415 1,435,158 - 11,614,506
Other projects 213 11 (429) (10,044) 9,989,806 23,405 - 254,801
Corporate 290,589 253,226 - (4,284,300) 35,550,644 5,566,193 76,625 36,779
Total 290,802 329,789 27,235 (4,982,381) 260,925,732 10,039,087 76,625 33,796,09
30 June 2019 Finance Income Depreciation Impairment of E&E Loss for the period Assets Liabilities Share Based Payments Non-current asset additions
(audited)
US$ US$ US$ US$ US$ US$ US$ US$
Cascabel project * 6,373 26,617 - (8,553,393) 152,074,758 3,684,895 7,699,676 59,337,971
Other Ecuadorian projects - 442 208,914 (647,753) 30,775,886 1,526,728 - 12,762,403
Other projects 630 13 19,337 (75,820) 9,739,313 7,435 - (60,147)
Corporate 668,408 40,532 - (22,792,827) 52,126,206 1,295,534 16,183,483 10,982,295
Total 675,411 67,604 228,251 (32,069,793) 244,716,163 6,514,592 23,883,159 83,022,522
31 December 2018 Finance Income Depreciation Impairment of E&E Loss for the period Assets Liabilities Share Based Payments Non-current asset additions
(unaudited)
US$ US$ US$ US$ US$ US$ US$ US$
Cascabel project * 6,396 11,786 801 (458,201) 124,482,923 3,517,357 - 36,753,367
Other Ecuadorian projects 177 - 29,635 (160,623) 17,328,903 296,875 - 3,914,615
Other projects 634 - (3,294) (46,183) 9,586,239 4,696 - 196,624
Corporate 5,351 20,112 - (26,818,512) 95,620,463 999,921 23,774,390 12,240,471
Total 12,558 31,898 27,142 (27,483,519) 247,018,528 4,818,849 23,774,390 53,105,076
* The Cascabel project is held by the subsidiary Exploraciones Novomining S.A.
which is 15% owned by a non-controlling interest.
NOTES TO THE interim condensed CONSOLIDATED FINANCIAL STATEMENTS
FOR THE HALF YEAR ENDED 31 DECEMBER 2019
NOTE 2 OPERATING SEGMENTS (continued)
Geographical information
Non-current assets 31 December 2019 30 June 2019
US$ US$
UK - -
Australia 13,877,049 21,560,971
Solomon Islands 156,102 60,743
Ecuador 213,059,323 178,456,923
227,092,474 200,078,637
NOTE 3 operating loss
Three months ended Three months ended Six months ended Six months ended
31 December 2019 31 December 31 December 2019 31 December
2018 2018
US$ US$ US$ US$
(unaudited) (unaudited) (unaudited) (unaudited)
The operating loss is stated after charging (crediting)
Interest revenue - external parties 119,329 6,500 290,802 12,558
119,329 6,500 290,802 12,558
Administrative and consulting expenses 1,574,095 1,747,529 3,141,150 3,191,935
Employment expenses 357,909 1,721,208 604,773 1,987,525
Depreciation 305,521 (156,978) 329,789 31,898
Legal Fees 198,786 132,505 360,930 163,083
Foreign exchange losses/(gains) (644,669) (425,353) 126,111 (1,508,221)
Movement in fair value of derivative liability (207,933) - (207,933) -
Share based payments (note 11) - 20,710,235 76,625 23,774,390
1,583,709 23,729,146 4,431,445 27,640,610
NOTES TO THE interim condensed CONSOLIDATED FINANCIAL STATEMENTS
FOR THE HALF YEAR ENDED 31 DECEMBER 2019
Note 4 Loss per share
Three months ended Three months ended Six months ended Six months ended
31 December 31 December 2018 31 December 31 December 2018
2019 2019
(unaudited) (unaudited) (unaudited) (unaudited)
Calculation of basic and diluted loss per share is in accordance with IAS 33
Earnings per Share.
Loss per ordinary share
Basic loss per share (cents per share) (0.1) (1.4) (0.3) (1.6)
Diluted loss per share (cents per share) (0.1) (1.4) (0.3) (1.6)
Net loss used in calculating basic and diluted loss per share (US$) (1,549,110) (24,234,313) (4,982,381) (27,414,789)
Number Number Number Number
Weighted average number of ordinary share used in the calculation of basic 1,858,523,219 1,754,980,680 1,858,523,219 1,754,980,680
loss per share
Weighted average number of dilutive options - - - -
Weighted average number of ordinary shares used in the calculation of diluted 1,858,523,219 1,754,980,680 1,858,523,219 1,754,980,680
loss per share
Options granted are not included in the determination of diluted earnings per
share as they are considered to be anti-dilutive.
NOTES TO THE interim condensed CONSOLIDATED FINANCIAL STATEMENTS
FOR THE HALF YEAR ENDED 31 DECEMBER 2019
Note 5 intangible Assets
Deferred exploration costs
US$
Cost
Balance at 1 July 2018 144,363,995
Effect of foreign exchange on opening balances (2,498,995)
Additions 72,995,493
Balance at 30 June 2019 (audited) 214,860,493
Effect of foreign exchange on opening balances (7,545)
Additions 31,158,538
Balance at 31 December 2019 (unaudited) 246,011,486
Impairment losses
Balance at 1 July 2018 (38,587,809)
Effect of foreign exchange on opening balances 1,437,439
Impairment charge (228,251)
Balance at 30 June 2019 (audited) (37,378,621)
Impairment charge (27,235)
Balance at 31 December 2019 (unaudited) (37,405,856)
Carrying amounts
At 30 June 2018 105,776,186
At 30 June 2019 177,481,872
At 31 December 2019 (unaudited) 208,605,630
Recoverability of the carrying amount of exploration assets is dependent on
the successful development and commercial exploitation of areas of interest,
and the sale of minerals or the sale of the respective areas of interest.
Note 6 INVESTMENTS
(a) Financial assets held at fair value through OCI
31 December 30 June
2019 2019
US$ US$
(unaudited) (audited)
Movements in financial assets
Opening balance at 1 July 5,952,439 4,031,236
Fair value adjustment through other comprehensive income (2,549,682) 1,921,203
Closing balance at the end of the reporting period 3,402,757 5,952,439
Financial assets comprise an investment in the ordinary issued capital of
Cornerstone Capital Resources Inc., listed on the Toronto Venture Exchange
("TSV") and an investment in the ordinary issued capital of Aus Tin Mining
Ltd, a company listed on the Australian Securities Exchange.
NOTES TO THE interim condensed CONSOLIDATED FINANCIAL STATEMENTS
FOR THE HALF YEAR ENDED 31 DECEMBER 2019
Note 6 INVESTMENTS (continued)
(b) Fair value
Fair value hierarchy
The following table details the consolidated entity's assets and liabilities,
measured or disclosed at fair value, using a three level hierarchy, based on
the lowest level of input that is significant to the entire fair value
measurement being:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or
liabilities that the entity can access at the measurement date.
Level 2: Inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly or indirectly.
Level 3: Unobservable inputs for the asset or liability.
The fair values of financial assets and financial liabilities approximate
their carrying amounts principally due to their short-term nature or the fact
that they are measured and recognised at fair value.
The following table represents the Group's financial assets and liabilities
measured and recognised at fair value.
US$ US$ US$ US$
Level 1 Level 2 Level 3 Total
31 December 2019 (unaudited)
Financial assets held at fair value through OCI 3,402,757 - - 3,402,757
Derivative liability at fair value through profit or loss - - 2,384,234 2,384,234
30 June 2019 (audited)
Financial assets held at fair value through OCI 5,952,439 - - 5,952,439
Derivative liability at fair value through profit or loss - - - -
The financial assets are measured based on the quoted market prices at 31
December 2019 and 30 June 2019.
The derivative liability at fair value through profit or loss has been valued
using the Monte Carlo Simulation method.
NOTES TO THE interim condensed CONSOLIDATED FINANCIAL STATEMENTS
FOR THE HALF YEAR ENDED 31 DECEMBER 2019
Note 7 LOAN RECEIVABLES
31 December 2019 30 June 2019
US$ US$
Loan receivables current asset
Company Funded Loan Plan Receivable 7,005,323 -
Closing balance at the end of the reporting period 7,005,323 -
Loan receivable and other non-current assets
Security bonds 1,352,132 1,300,134
Company Funded Loan Plan Receivable - 6,496,407
Balance at end of reporting period 1,352,132 7,796,541
Company Funded Loan Plan Receivable
Opening balance at 1 July 6,496,407 -
Additions - funds loaned under the plan - 7,220,950
Fair value adjustment recognised as an employee benefit expense - (921,448)
Accretion of interest 223,037 299,319
Effect of foreign exchange 285,879 (102,414)
Balance at end of reporting period 7,005,323 6,496,407
The Company Funded Loan Plan (the "Plan") is a plan established by the Company
to assist employees in exercising share options. On 29 October 2018, the
Company assisted employees to exercise 19,950,000 options previously issued to
employees of the Company in 2019 via the Plan. As at 31 December 2019 there
have been no repayments against the loans provided.
The key terms of this Plan are as follows:
· The employee may only use a loan under the Plan to pay for the
exercise of Employee Options granted by the Company.
· The loan will be granted for a maximum period of 2 years.
· No interest will be charged on the loan.
· The loan is secured by the shares granted on the exercise of the
Employee Options.
· The loans provided are full recourse.
As the loan provided by the Company was at a favourable rate of interest for
the employees, the loan receivable under the Plan was fair valued. The fair
value of the loan was estimated based on the future cash flow and a market
rate of 7%. In future reporting periods, the loan will be measured at
amortised cost. The loans provided are full recourse loans. If the sale of
shares does not cover full repayment the balance will be recovered from
employees. This transaction was a non cash transaction with employees.
Management have considered the likelihood of default is low and the expected
credit losses under the loans will be immaterial and accordingly, no
impairment has been recognised at 31 December 2019. The loan is a non-cash
transaction. The loan was reclassified from non-current to current for the
period ending 31 December 2019, as there is less than 12 months until the
receivable falls due.
Security bonds relate to cash security held against office premises, Level 27,
111 Eagle St, Brisbane, Queensland Australia, Octagon Point, 5 Cheapside, St
Paul's London United Kingdom, cash security held by Queensland Department of
Natural Resources and Mines against Queensland exploration tenements held by
the Group and on cash backed bank guarantees held by the Ecuadorian Ministry
of Environment against Ecuadorian exploration tenements held by the Group.
NOTES TO THE interim condensed CONSOLIDATED FINANCIAL STATEMENTS
FOR THE HALF YEAR ENDED 31 DECEMBER 2019
Note 8 LEASE LIABILITIES
31 December 2019 30 June 2019
US$ US$
Current Liability
Lease Liability 582,644 -
Closing balance at the end of the reporting period 582,644 -
Non-current Liability
Lease Liability 1,141,489 -
Balance at end of reporting period 1,141,489 -
Note 9 OTHER FINANCIAL LIABILITIES
Derivative liability at fair value through profit or loss
Opening balance at 1 July - -
Additions - options issues to BHP 2,592,167 -
Fair value adjustment recognised through profit or loss (207,933) -
Balance at end of reporting period 2,384,234 -
NOTES TO THE interim condensed CONSOLIDATED FINANCIAL STATEMENTS
FOR THE HALF YEAR ENDED 31 DECEMBER 2019
Note 10 SHARE CAPITAL
Six months Twelve months ended
ended 30 June
2019
31 December
2019
US$ US$
(unaudited) (audited)
a) Issued capital and share premium
Ordinary shares fully paid up 343,226,061 323,778,383
b) Movement in ordinary shares
At the beginning of the reporting period 323,778,383 247,385,371
Shares issued during the period 19,452,068 76,498,593
Transaction costs on share issue (4,390) (105,581)
At reporting date 343,226,061 323,778,383
Six months Twelve months ended
ended 30 June
2019
31 December
2019
Number Number
(unaudited) (audited)
c) Movement in number of ordinary shares on issue
Shares at the beginning of the reporting period 1,846,321,033 1,696,245,686
- Shares issued at £0.28 - Exercise of options 4 October 2018 - 550,000
- Shares issued at £0.14 - Exercise of options 11 October 2018 - 9,795,884
- Shares issued at £0.28 - Exercise of options 11 October 2018 - 9,795,884
- Shares issued at £0.45 - BHP placement 17 October 2018 - 100,000,000
- Shares issued at £0.28 - Exercise of options 29 October 2018 - 20,624,553
- Shares issued at £0.3888 - BHP share issue 8 November 2018 - 2,596,826
- Shares issued at £0.3714 - Newcrest share issue 26 November 2018 - 6,712,200
- Shares issued at £0.2215 - BHP share issue 25 November 2019 77,000,000 -
Shares at the reporting date 1,923,321,033 1,846,321,033
NOTES TO THE interim condensed CONSOLIDATED FINANCIAL STATEMENTS
FOR THE HALF YEAR ENDED 31 DECEMBER 2019
NOTE 11 share options
At 31 December 2019 the Company had 182,662,000 options outstanding for the
issue of ordinary shares (31 December 2018: 162,512,000).
Options
Share options are granted to employees under the company's Employee Share
Option Plan ("ESOP"). The employee share option plan is designed to align
participants' interests with those of shareholders.
Unless otherwise documented by the Company, when a participant ceases
employment prior to the vesting of their share options, the share options are
forfeited after 90 days unless cessation of employment is due to termination
for cause, whereupon they are forfeited immediately. The Company prohibits key
management personnel from entering into arrangements to protect the value of
unvested ESOP awards.
The contractual life of each option granted is generally two to three years.
There are no cash settlement alternatives.
Each option can be exercised from vesting date to expiry date for one share
with the exercise price payable in cash.
Share options issued
There were 22,4000,000 options granted during the period ended 31 December
2019 (31 December 2018: 115,750,000).
On 20 September 2019, the Company issued a combined total of 3,150,000
unlisted share options over ordinary shares of the Company to a Director
following approval granted by shareholders at the Company's AGM on 20
September 2019. The options are exercisable at £0.60 and expire on 20
December 2021.
On 2 December 2019, the Company issued 77,000,000 new ordinary shares at
£0.2215 to BHP Billiton Holdings Limited ("BHP"). As part of the share
subscription, BHP were issued 19,250,000 options exercisable at £0.37 which
expire on 27 November 2024.
NOTES TO THE interim condensed CONSOLIDATED FINANCIAL STATEMENTS
FOR THE HALF YEAR ENDED 31 DECEMBER 2019
NOTE 11 share options (continued)
The share options outstanding at 31 December 2019 are as follows:
Date of grant Exercisable from Exercisable to Exercise prices Number granted Number at 31 December 2019
9 August 2017 The options vest on the earlier of: 8 August 2020 £0.60 46,750,000 44,500,000*
(a) 18 months, or (b) a Change of Control Transaction
9 August 2017 The options vested immediately, exercisable through to 8 August 2020 8 August 2020 £0.60 12,000 12,000
5 July 2018 The options vested immediately and exercisable through to 4 July 2020 4 July 2020 £0.40 21,250,000 21,250,000
5 July 2018 The options vested immediately and exercisable through to 4 July 2020 4 July 2021 £0.60 250,000 250,000
6 November 2018 The options vested immediately and exercisable through to 6 November 2021 6 November 2021 £0.60 82,875,000 82,875,000
20 December 2018 The options vested immediately and exercisable through to 20 December 2021 20 December 2021 £0.60 11,375,000 11,375,000
20 September 2019 The options vested immediately and exercisable through to 20 December 2021 20 December 2021 £0.60 3,150,000 3,150,000
2 December 2019(1) The options vested immediately and exercisable through to 2 December 2024 2 December 2024 £0.37 19,250,000 19,250,000
184,912,000 182,662,000
*2,250,000 options previously issued to John Bovard were forfeited during the
prior year as a result of his retirement.
(1)Options issued to BHP as part of the share subscriptions on 2 December 2019
and exercisable at £0.37 within 5 years. These options fall outside the scope
of IFRS 2 and is classified as a derivative financial liability.
NOTES TO THE interim condensed CONSOLIDATED FINANCIAL STATEMENTS
FOR THE HALF YEAR ENDED 31 DECEMBER 2019
NOTE 11 share options (continued)
Share-based payments
The number and weighted average exercise price of share options are as
follows:
Weighted average exercise price Number of options Weighted average exercise price Number of options
31 December 2019 31 December 2019 31 December 2018 31 December 2018
Outstanding at the beginning of the period £0.57 160,262,000 £0.44 88,353,768
Exercised during the period - - £0.25 (40,766,321)
Lapsed during the period - - £0.28 (825,447)
Granted during the period £0.40 22,400,000 £0.56 115,750,000
Outstanding at the end of the period £0.55 182,662,000 £0.57 162,512,000
Exercisable at the end of the period £0.55 182,662,000 £0.56 115,762,000
The options outstanding at 31 December 2019 have exercise prices of £0.37,
£0.40, and £0.60 (31 December 2018: £0.40 and £0.60) and a weighted
average contractual life of 1.73 years (31 December 2018: 2.33 years).
Share options held by Directors are as follows:
Share options held At 31 December 2019 At 31 December 2018 Option Price Exercise Period
Nicholas Mather 26,250,000 26,250,000 60p 28/01/19 - 08/08/20
5,000,000 - 60p 20/12/18 - 20/12/21
Brian Moller 3,750,000 3,750,000 60p 28/01/19 - 08/08/20
1,425,000 1,425,000 60p 20/12/18 - 20/12/21
Robert Weinberg 2,250,000 2,250,000 60p 28/01/19 - 08/08/20
900,000 900,000 60p 20/12/18 - 20/12/21
John Bovard - 2,250,000 60p 28/01/19 - 08/08/20
Craig Jones 2,250,000 2,250,000 60p 28/01/19 - 08/08/20
900,000 900,000 60p 20/12/18 - 20/12/21
James Clare 3,150,000 3,150,000 60p 20/12/18 - 20/12/21
Jason Ward - 5,000,000 28p 30/10/16 - 28/10/18
5,000,000 5,000,000 60p 28/07/17 - 08/08/20
5,000,000 5,000,000 60p 06/11/18 - 06/11/21
Liam Twigger 3,150,000 - 60p 20/09/19 - 20/12/21
Anna Legge 3,000,000 3,000,000 40p 05/07/18 - 04/04/20
3,000,000 3,000,000 60p 06/11/18 - 06/11/21
NOTES TO THE interim condensed CONSOLIDATED FINANCIAL STATEMENTS
FOR THE HALF YEAR ENDED 31 DECEMBER 2019
NOTE 11 SHARE OPTIONS (continued)
Share-based payments (continued)
The fair value of services received in return for share options granted is
measured by reference to the fair value of share options granted. This
estimate is based on the Black-Scholes model considering the effects of the
vesting conditions, expected exercise period and the dividend policy of the
Company.
Fair value of share options and assumptions £0.60 Options
20 September 2019
Number of options 3,150,000
Share price at issue date £0.2315
Exercise price £0.60
Expected volatility 56.112%
Option life 2.25 years
Expected dividends 0.00%
Risk-free interest rate (short-term) 0.51%
Fair value £0.0195
Valuation methodology Black-Scholes
US$
Share based payments expense recognised in statement of comprehensive income 76,625
Share based payments expense recognised as share issue costs -
Share based payments expense to be recognised in future periods -
The calculation of the volatility of the share price on the above was based on
the Company's daily closing share price over the two year period, dependant on
the exercise period attributable to the tranche of options, prior to the date
the options were issued.
NOTES TO THE interim condensed CONSOLIDATED FINANCIAL STATEMENTS
FOR THE HALF YEAR ENDED 31 DECEMBER 2019
NOTE 12 RELATED PARTIES
Transactions with Directors and Director-Related Entities
(i) The Company had a commercial agreement with Samuel
Capital Ltd ("Samuel") for the engagement of Nicholas Mather as Chief
Executive Officer and Executive Director of the Company. For the half year
ended 31 December 2019 US$204,425 was paid or payable to Samuel (2018:
US$323,840). The total amount outstanding at 31 December 2019 was US$nil (31
December 2018: US$ nil, 30 June 2019: US$925).
(ii) The Company has a long-standing commercial
arrangement with DGR Global Ltd, an entity associated with Nicholas Mather (a
Director) and Brian Moller (a Director), for the provision of various
services, whereby DGR Global provides resources and services including the
provisions of its administration and exploration staff, its premises (for the
purposes of conducting the Company's business operations), use of existing
office furniture, equipment and certain stationery, together with general
telephone, reception and other office facilities ("Services"). In
consideration for the provision of the Services, the Company shall reimburse
DGR Global Ltd for any expenses incurred by it in providing the Services. DGR
Global shall also invoice the Company from time to time for the provision of
in-house legal counsel services. DGR Global Ltd was paid US$123,273 (2018:
US$126,720) for the provision of administration, management and office
facilities to the Company during the half year ended 31 December 2019. The
total amount outstanding at 31 December 2019 is US$48,179 (31 December 2018:
US$16,981, 30 June 2019 US$15,788).
(iii) Mr Brian Moller (a Director), is a partner in the
Australian firm Hopgood Ganim Lawyers. For the half year ended 31 December
2019, US$82,355 was paid or payable to Hopgood Ganim (2018: US$102,871) for
the provision of legal services to the Company. These services were based on
normal commercial terms and conditions. The total amount outstanding at 31
December 2019 is US$31,183 (31 December 2018: US$12,504, 30 June 2019 US$
nil).
(iv) Mr James Clare (a Director), is a partner in the
Canadian firm Bennett Jones lawyers. For the half year ended 31 December
2019, US$521,921 was paid or payable to Bennett Jones (2018: US$32,879) for
the provision of legal services to the Company. The services were based on
normal commercial terms and conditions. The total amount outstanding at 31
December 2019 is US$244,713 (31 December 2018: US$ nil, 30 June 2019 US$ nil).
NOTE 12 COMMITMENTS AND CONTINGENT ASSET AND LIABILITIES
A 2% net smelter royalty is payable to Santa Barbara Resources Limited, who
were the previous owners of the Cascabel tenements. These royalties can be
bought out by paying a total of US$4 million. Fifty percent (50%) of the
royalty can be purchased for US$1 million 90 days following the completion of
a feasibility study and the remaining 50% of the royalty can be purchased for
US$3 million 90 days following a production decision. The smelter royalty is
considered to be a contingent liability as the Group has not yet completed a
pre-feasibility study at 31 December 2019 as such there is significant
uncertainty over the timing of any payments that may fall due.
NOTES TO THE interim condensed CONSOLIDATED FINANCIAL STATEMENTS
FOR THE HALF YEAR ENDED 31 DECEMBER 2019
NOTE 13 COMMITMENTS AND CONTINGENT ASSET AND LIABILITIES (continued)
SolGold elected to undertake the Optional Subscription under the terms of the
Term Sheet (Term Sheet) signed between SolGold plc and Cornerstone Capital
Resources Inc. (CGP), CGP's subsidiary Cornerstone Ecuador S.A, (CESA) and
Exploraciones Novomining S.A, (ENSA) and holds an aggregate registered and
beneficial equity position in ENSA of 85% under the terms of the Term Sheet.
CGP and CESA elected to obtain the benefit of the Financing Option whereby
SolGold will solely fund all operations and activities of ENSA until the
completion of a Feasibility Study, including CESA's contribution as the
registered and beneficial holder of an aggregate equity position in ENSA of
15%. After completion and delivery of the Feasibility Study, SolGold and CESA
shall jointly fund the operations and activities of ENSA based on their
respective equity positions in ENSA's on a proportionate basis. Furthermore,
the Term Sheet allows for SolGold to be fully repaid for the financing
provided, including interest at LIBOR plus 2% for the expenditures incurred by
SolGold from the time CGP and CESA elected the Financing Option. SolGold is to
be repaid out of 90% of CESA's distribution of earnings or dividends from ENSA
or the Cascabel Tenement to which CESA would otherwise be entitled. If CESA
does not elect to contribute and its equity stake in ENSA is diluted to below
10%, its equity stake in ENSA will be converted to a 0.5% interest in the Net
Smelter Return and SolGold may acquire this interest for the US$3.5 million at
any time.
The amount receivable from CESA at 31 December 2019 was US$28,682,502 (2018:
US$17,860,536). As there is uncertainty as to whether ENSA will be able to
distribute earnings or dividends, a provision for impairment has been
recognised on the entire amount receivable from CESA.
There are no other significant changes to commitments and contingencies
disclosed in the most recent annual financial report.
NOTE 13 SUBSEQUENT EVENTS
The Directors are not aware of any significant changes in the state of affairs
of the Group or events after balance date that would have a material impact on
the half year condensed consolidated financial statements.
DIRECTORS' RESPONSIBILITY STATEMENT AND REPORT ON PRINCIPAL RISKS AND
UNCERTAINTIES
Responsibility statement:
We confirm to the best of our knowledge:
a) The condensed set of financial statements have been prepared in
accordance with IAS 34 Interim Financial Reporting as adopted by the EU
b) The interim management report includes a fair review of the
information required by:
I. DTR 4.2.7R of the Disclosure and Transparency Rules, being an
indication of important events that have occurred during the first six months
of the financial year and their impact on the condensed set of financial
statements: and a description of the principal risks and uncertainties for the
remaining six months of the year; and
II. DTR 4.2.8R of the Disclosure and Transparency Rules, being related
party transactions that have taken place in the first six months of the
current financial year and that have materially affected the financial
position or performance of the entity during the period, and any changes in
the related party transactions described in the last annual report that could
do so.
This report contains forward-looking statements. These statements are based on
current estimates and projections of management and currently available
information. Future statements are not guarantees of the future developments
and results outlined therein. Rather, future developments and results are
dependence on a number of factors; they involve various risks and
uncertainties and are based upon assumptions that may not prove to be
accurate. Risks and uncertainties identified by the Group are set out on page
53 of the 2019 Annual Report and Accounts. We do not assume any obligation to
update the forward-looking statements contained in this report.
Signed in accordance with a resolution of Directors.
On behalf of the Directors
Nicholas Mather
Executive Director
Brisbane
13 February 2020
INDEPENDENT REVIEW REPORT TO SOLGOLD PLC
Introduction
We have been engaged by the Company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 31
December 2019 which comprises the interim condensed consolidated statement of
profit or loss and other comprehensive income, interim condensed consolidated
statement of financial position, interim condensed consolidated statement of
changes in equity, interim condensed consolidated statement of cash flows and
notes to the interim condensed consolidated financial statements.
We have read the other information contained in the half-yearly financial
report and considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed set of
financial statements.
Directors' responsibilities
The half-yearly financial report is the responsibility of and has been
approved by the directors. The directors are responsible for preparing the
half-yearly financial report in accordance with the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct Authority.
As disclosed in note 1, the annual financial statements of the group are
prepared in accordance with International Financial Reporting Standards
(IFRSs) as adopted by the European Union. The condensed set of financial
statements included in this half-yearly financial report has been prepared in
accordance with International Accounting Standard 34, ''Interim Financial
Reporting'', as issued by the International Accounting Standards Board (IASB)
and International Accounting Standard 34, "Interim Financial Reporting", as
adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed
set of financial statements in the half-yearly financial report based on our
review.
Scope of review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410, ''Review of Interim Financial Information
Performed by the Independent Auditor of the Entity'', issued by the Financial
Reporting Council for use in the United Kingdom. A review of interim
financial information consists of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying analytical and
other review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on Auditing (UK)
and consequently does not enable us to obtain assurance that we would become
aware of all significant matters that might be identified in an audit.
Accordingly, we do not express an audit opinion.
Material uncertainty related to going concern
We draw attention to Note 1 to the interim financial statements, which
indicates that the group's ability to continue as a going concern is dependent
on its ability to secure additional funding. As stated in Note 1, these events
or conditions indicate that a material uncertainty exists which may cast
significant doubt over the group's ability to continue as a going concern. Our
conclusion is not modified in respect of this matter.
Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 31 December 2019 is not prepared,
in all material respects, in accordance with International Accounting Standard
34, ''Interim Financial Reporting'', as issued by the International Accounting
Standards Board (IASB), International Accounting Standard 34, "Interim
Financial Reporting", as adopted by the European Union and the Disclosure
Guidance and Transparency Rules of the United Kingdom's Financial Conduct
Authority.
Use of our report
Our report has been prepared in accordance with the terms of our engagement to
assist the Company in meeting its responsibilities in respect of half-yearly
financial reporting in accordance with the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct Authority and for
no other purpose. No person is entitled to rely on this report unless such a
person is a person entitled to rely upon this report by virtue of and for the
purpose of our terms of engagement or has been expressly authorised to do so
by our prior written consent. Save as above, we do not accept responsibility
for this report to any other person or for any other purpose and we hereby
expressly disclaim any and all such liability.
BDO LLP
Chartered Accountants
London, UK
13 February 2020
BDO LLP is a limited liability partnership registered in England and Wales
(with registered number OC305127).
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